Unlocking Growth: Building a sustainable growth engine with the new rules of marketing.
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Sean EllisFollow
Jul. 22, 2014•0 likes•50,314 views
Unlocking Growth: Building a sustainable growth engine with the new rules of marketing.
Jul. 22, 2014•0 likes•50,314 views
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As Marc Andreessen says, startups fail for two primary reasons: either they try to grow when they're not ready to, or they're not aggressive enough when they're finally to grow. In this presentation Morgan Brown walks through the Startup Pyramid framework to show how startups can gain traction and drive sustainable growth.
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Unlocking Growth: Building a sustainable growth engine with the new rules of marketing.
- 1. Unlocking Growth Building a sustainable growth engine with the new rules of marketing.
- 2. “Most startups don’t fail at building a product. They fail at acquiring customers.” – Gabriel Weinberg
- 3. Startup Growth Pyramid Growth Stacking the Odds Product/Market Fit Source: Sean Ellis
- 4. Growth Stacking the Odds Product/Market Fit Source: Sean Ellis
- 5. Get to Product Market Fit First
- 6. What is Product/ Market Fit? A large group wants/needs your product – it’s a ‘must have’.
- 7. “Focus obsessively on getting to product/ market fit.” – Mark Andreessen
- 8. Do you have PMF? Ask “How would you feel if you could no longer use the product?”
- 10. “Very Disappointed” 0 – 25% 26 – 39% 40 – 100% Keep burn low, engage, iterate Try repositioning, retargeting Proceed up pyramid
- 12. Growth Stacking the Odds Product/Market Fit Source: Sean Ellis
- 13. Race to scale Instrument your product Activate users Increase exposure—the race to scale
- 14. Instrument your product Source data (referral source in user record) Event & cohorts Conversion rates Engagement/retention Lifetime value
- 16. Find your metric that matters “x people did x searches in past week” “y people visited my site x times last month” “z users send n messages via my app each day” Source: Josh Elman
- 17. Build a Value Delivery Engine
- 18. Build a must-have product Understand must-have experience (MHX) Calibrate hook & promise messaging Optimize flows to deliver MHX Must-Have experience Hook/ Promise Source: Sean Ellis
- 19. Steps for value delivery engine Understand MHX Macro Optimization Segment/ Personalize
- 22. Max % that reach MH experience Build desire, reduce friction Must-Have experience Hook/ Promise Goals
- 23. Desire – Friction = Conversion Rate Source: Sean Ellis
- 25. A/B test combos Messaging Flows Hooks based on intent/pain Promise based on MHX Clear description of solution Flows that reduce friction Flows that frontload MHX
- 26. Language market fit What is this thing you’ve built to your users? Store your photos Share your photos Find a date Help people find a date
- 27. Developing promise statements Focus on a single benefit for each Limit to about 10 words Write wildly different statements
- 28. Segment/personalize last Default to macro first, then segment At a minimum manage active vs. inactive Develop programs to manage full lifecycle
- 29. Growth Stacking the Odds Product/Market Fit Driving Growth is Last Step Source: Sean Ellis
- 30. Four Types of Growth 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 1 2 3 4 5 6 7 8 9 10 11 12 13 Topline Activated Retained Monetized Source: James Currier
- 31. “Growth is about taking your product and optimizing it to create compound interest. There are very few (if any) silver bullets when it comes to growth.” – Andy Johns
- 32. Why Growth Hacking? $0 $20 $40 $60 $80 $100 $120 $140 $160 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 US Online Ad Spend per User
- 33. “Growth hacking: A cool-sounding euphemism for making the doer feel good about using the same old sleazy marketing tricks.” – David Heinemeier Hansen
- 34. “Growth hacking is a recognition that when you focus on understanding your users and how they discover and adopt your products, you can build features that help you acquire and retain more users, rather than just spending marketing dollars.” – Josh Elman
- 35. Don’t delegate growth to a ‘hacker’ Original vision on customer need Don’t abdicate fate to a marketer Growth as an organizational priority
- 36. Growth = fx (Probability of Success, Impact, Resources Required) Source: Brian Balfour
- 37. Right marketing mix for you? What are you optimizing for? (Learning, volume, cost) What are your constraints? (Time, money, audience, legal) Source: Brian Balfour
- 38. New User Channels Email Facebook Twitter Pinterest Craigslist Google+ iOS Android Blog widget Google SEO Tumblr Twitter WOM Press Appstore Featured TV Apps Mobile ads Web ads Online video TV ads Radio ads SEM Affiliates Viral Paid WOM Source: James Currier
- 39. Categories of growth hacks Platform integrations Powered by Instrumented virality Data-driven hacks Igniting word of mouth
- 40. 0 20 40 60 80 100 120 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Viral Channel Effectiveness WOM Email MySpace Facebook Craigslist Twitter iOS Android James Currier
- 41. Growth Stacking the Odds Product/Market Fit Build Growth on a Solid Foundation Source: Sean Ellis
- 42. Growth EnginesCase Studies of How Today's Most Successful Startups Unlock Extraordinary Growth DOWNLOAD ON AMAZON.COM
Editor's Notes
- My name is Morgan Brown, and I run marketing for Inman News. What we’re going to focus on today is how to unlock growth and grow your business. How to acquire users, activate, retain and monetize them. Startups have two major failures: 1) They spend too much time trying to grow when they’re not ready for it. 2) They’re not aggressive enough when the business is ready to scale So it’s my job today to help you avoid making those mistakes.
- Here’s the basic reality of startup failure. Most startups have created a competency in developing a product. But they fail because they can’t grow—they can’t attract a growing user base. That can happen for many reasons, maybe you built something that people didn’t want, or couldn’t find a way to reach them. Either way, typically your problem is not in bringing something into this world, it’s getting people to use it. That’s what we’re going to tackle today.
- Sean developed a concept or model for growth called the start up pyramid. It provides a framework for thinking about how to grow and scale a startup. The goal of every startup is to gain enough traction to scale to the next round of funding, IPO, etc. The riskiest part, and hardest part is getting that early traction. The Startup Marketing Pyramid gives you a set of milestones as you move toward being ready to scale growth. The way the pyramid works is you start at the bottom and work your way to the top. As you pass each milestone/stage, you are closer to being ready to scale If you’re building a network effects business, the model is a bit different, which I’ll address at the end of this section, but the core components are still important, the order is just reversed. So let’s start at the bottom
- The first goal of any startup is to get to product market fit first. (PMF) Who here wants to give a definition?
- At it’s core, product/market fit is when a large group of people want/need your product. It’s essential to them on a regular basis. It’s when you can’t keep your product in stock, or you can’t add servers fast enough to keep up with capacity. Product/market fit represents that tipping point of when your product goes from nice-to-have to a must-have A startup’s life can be separated between Before PMF and After PMF Before PMF you’re searching / after PMF you’re focused on scaling Who is your large audience and what is the big problem you’re solving?
- For a startup, you should be focused on just one thing—getting to product/market fit. Nothing else matters. Because without it, you can’t drive sustainable, lasting growth. Sure you can throw a bunch of money at your product, or tap into a viral channel, but that growth is unsustainable, and can crash and burn just a quickly as it took off. So before you do anything, get to product market fit Prioritization is so key—ask yourself if what you’re doing every day is getting you toward this goal.
- To figure out if you have PMF, you simply ask. Ask your users: How would you feel if you could no longer use the product. You want to send this question to active users of your product. It’s up to you to define what that state is. You give them four options here: Very Disappointed Somewhat Disappointed Not Disappointed (it really isn’t that useful) N/A — I no longer use (product name) The magic number you’re going for with this question is 40%. If you have 40%, it’s likely you have a product that’s a must have for a segment of your users, and you can proceed up the pyramid with a focus on acquiring more people who consider your product a must-have. This question is going to single-handedly tell you how valuable your product is to your audience, and how much of a must-have it is for them. I’ll give you a couple of ideas on how to ask this question of your users in a second. But a couple of notes: 1) this is a terrifying question to ask, what if they say it’s useless?! 2) 40% is more of a guideline than an absolute. You can get a 40% response and still fail to gain traction, but it does give you a solid understanding if you’re creating something that people love. But what if you don’t get 40%...
- You can use survey.io to get the answer to that question and a lot more helpful data. Simply fill out a few fields and you have a survey ready to send to your customer base (or a segment, as you define it) Survey.io also gives you a lot of other great info to help you with customer development and finding PMF ID most important new user channels by asking users how they discovered you What competition you face—by asking what alternative they’d use Primary benefit of the service to help you position your product more effectively Get an idea of your word of mouth potential by asking if people have referred others What could be better to help determine gaps in your core offering So here’s a to-do — go back and run survey.io once you get some initial users.
- 26-39% is the kind of grey zone. You have something that a decent chunk of your customers can’t live without, but not an overwhelming amount. So at this point you want to try to reposition your company and value prop, and retarget it to more of your must have users. You want to look for commonality among the 26-39% group and see if you can either 1) find what they love about the product to inform how you reposition it, and 2) retarget the product to new users who represent a particular subset of your user base. Circle of Moms is a good example of this. They started out as Circle of Friends on Facebook and grew massively through that viral channel. But realized that moms were far more active than other users. Based on that feedback, they pivoted to Circle of Moms, and while they’re initial numbers dropped, they created a vibrant community of moms that was eventually sold to Sugar Inc.
- Only after you hit FMF is it time to transition to growth. Remember, most startups make the mistake of trying to grow before they’re ready. Spend your time and resources finding customers who love what you’re building. Once you have signal that you’ve built something that people love—then transition to growth.
- Once you have product/market fit the next thing to do is to ‘stack the odds’ for growth. Stacking the odds is all about capitalizing on growth opportunities by making sure your funnel delivers as many people to your must have experience as possible, and that you can measure and tune your business. The keys to the stacking the odds stage include: Instrumenting your product–user accounting Position on key differentiated value Implement business model Reduce friction And finally, increasing exposure
- The steps in the stacking the odds phase are: instrument your product, activate your users through conversion rate optimization, and then accelerate and increase exposure to drive scale. This part will start to get uncomfortable, after iterating at low burn to find PMF, you’re going to start spending some money By accelerating speed now, long term burn will come down – less head wind. Leaders accrue benefits, WOM, etc Will be really hard and uncomfortable after low burn phase and VC praise You’re also going to have to shift resources to first run (FUE) and growth experiments, and away from feature development, to help find the growth channels that will work
- You can’t fly a plane without a dashboard, and you can’t grow a startup that’s not instrumented either—you’re literally flying blind, and you won’t know what’s working, what’s not working and why. Many people don’t want to make the investment up front on analytics. Or they just want to use Google Analytics, because it’s free. With so many good, low cost tools out there these days, not having your analytics nailed is inexcusable. You want to be able to track all of the above, and the best way to do that is to track at the people or event level on a cohort basis. To do that you’ll want to use something like KISSmetrics or Mixpanel. If you use a service like segment.io, you are able to move your events around between services and find the one that works best for you without data lock in. While some of the newer advancements in GA let you do some cohort analysis, I’ve found that these other tools are more efficient and robust in seeing groups of users over time. You can also store some of this in your user table, but as long as you’re using one of the analytics packages I recommend, you don’t need to add this step. You has analytics set up? What are you using?
- It’s important to track metrics at all phases of the funnel. This is Dave McClure’s Pirate Metrics—AARRR!—and they give you a complete look at your user base throughout the funnel. The important thing to know about the pirate metrics is that you want to track them week over week if possible, so that you can see how your funnel changes over time. If you’re just capturing it in a vacuum it won’t give you a look at how your business is changing. The best analytics are ratios, not absolutes. Ratios give you an idea of change, context. So your metrics should be mostly ratios. This will keep you from getting trapped by vanity metrics.
- Speaking of vanity metrics, there are a lot of things that you could track. But just because you can, doesn’t mean you should. What you need to find are the metrics that really tell you the health of your business. And they help you determine which of your users are regulars, or have been activated. You determine these metrics by looking at your users and finding the most successful ones. Then trying to get as many of those users to that point. A couple of examples from my past. At TurnHere we knew a video had to be produced within 30 days of order, or it likely wouldn’t be made. At ScoreBig we knew that as soon as you made your first offer, you were likely to make another within 45 days. At Qualaroo we know that if you add an intent survey and an exit survey that you’re most likely to buy. So look at the data and figure out what it is that activates your users and is critical to your success. If you don’t have data yet, make some assumptions about what it is that activates your users and then start measuring. Everyone should have a metric that matters. Facebook – 10 friends in 7 days Twitter – 7 visits in a month LinkedIn – profile views over page views
- Once you have your company instrumented it’s time to really dial in your value delivery engine. Why call it a value delivery engine instead of a funnel? For a couple of reasons: 1) The most sustainable growth is the creation and delivery of utility or value. The more value you deliver to more people, the bigger you grow. You can almost think of growth in terms of units of utility delivered. The more units of value you deliver to more people, the more you grow. 2) Funnels are one way—your funnel hopefully has a powerful word of mouth modifier on it that is additive to the top of the funnel. The more value you deliver, the greater your word of mouth tailwind will be. The more crappy your product, the less powerful WOM is.
- Here’s what your value delivery engine looks like—this is the core to creating growth: Build a must-have product that people love Understand what the aha moment is for your users—what is the thing that helps them truly ‘get’ the value of what you’ve created Start at the very top of the funnel with the right hook and promise that draws your audience in Then optimize each flow to deliver that must have experience A couple of notes: You probably have more than one funnel or flow that delivers the must have experience You may have more than one must have experience For example, Dropbox has a couple of flows—file storage vs. file sharing. Two very different value propositions and aha moments. One was all about ease of backup, OSX integration, storage and files anywhere. The other was collaboration and sharing. Each flow had to be optimized on its own, with it’s own Hook/Promise and funnel optimization to get users to their MHX. Sean says that when they tried to introduce other value props in those funnels conversion took a hit, so they needed to focus on optimizing each of those on their own. Once someone got to that MHX, could they introduce the other value props of the product. Take a few minutes and draw this for yourself—let’s get someone up here to draw it with me.
- So how do you do this? Must understand your MHX, and do everything you can to get people there seamlessly Start with macro optimizations. The big things that can move the needle Then move on to additional optimizations by segmenting and personalizing the experience on the user level Let’s take a look at all of these now.
- The hook/promise and first user experience are at the very top of the funnel, but once in it, you want to optimize the funnel to feed your engine. The idea at every step of the way is to help more of the right people get to your must have experience.
- Conversion optimization isn’t a research-driven or ad hoc activity to get one-time answers. CRO can be your biggest growth lever when used properly. You want to start early, so that you can find wins and establish a culture of testing and learning. Setting up a successful optimization process relies on three key elements. Guessing is expensive. Get early wins to drive culture of data as core to growth.
- Remember the goal of your funnel work—it’s to get people to the must have experience. You want as many of the right people to get to the experience as possible. You have to go beyond the page level optimization to look at the entire funnel to see if your conversions are improving ultimate metrics or not.
- Conversion Rate = Desire - Friction High Desire, High Friction = Frustration Low Desire, Low Friction = Apathy
- With limited traffic, time and resources you need to prioritize what you test—you want to get the most out of your efforts as possible. That’s why you want to use insights to inform your testing strategy. KingsPoint ecommerce case study story So how to prioritize? Look at insights for clues, then use PIE framework, as advocated by Wider Funnel: P—Potential for impact and wins I—Importance of the page or flow E—Ease of experiment implementation
- If you’re not sure where to start with testing, we recommend scripting your first 10 tests: 4 on messaging 4 on front-loading aha’s/MHX 2 large design tests But start with a why for every test—why are we doing this, what are we hoping to learn, etc. I made some spreadsheets on GrowthHackers.com that you can find and use to track the tests you want to run, etc.
- The language changes what your users and your team thinks about the product. Compare these products and how you perceive them. Not just your users but your team as well! Coleman Walsh talked about mental models in your UX class as ways people think about things, but we store those ideas as words, so the language is critical.
- Potential inputs for ideas: customers (ask via survey or in interviews), original product idea, key problem you hope to solve Make sure they are wildly different so that when you test them the similar ones don’t split the vote. You’ll want to test these to see which resonates the best among users Time to write them yourself!
- Enhance engagement Encourage sharing Reduce churn Negative churn Drive sales Circle of Moms example User accounting For example—start off with your visitors vs. your regulars or engaged vs. the rest of your user base for communicating. Even with this simple segmentation you can talk differently to your segments and make your communications more relevant to them. There are lots of tools to do this, such as Intercom.io from right here in Dublin, to customer.io, GetVero, etc. The idea is to find ways to make your message and experience as relevant as possible to your different user types so that you can maximize the value of your user base. For example: Inactive: reactivate Active: deeper engagement Regulars: referral
- Once you have product/market fit and have stacked the odds you are now ready to grow This gives you the best odds for scalable, sustainable growth When you do things in this order, you are able to leverage growth opportunities. Now time for growth hacking? Yes.
- When you think about growth, don’t just think about acquisition. It’s the one that comes to the top of mind, but there are actually four types of growth Topline—new user acquisition Activated—users who’ve become users of your product, have experienced the MHX and are active Retained—users who you’ve retained through reduced churn, etc. Monetized—users you’ve monetized via cross-sells, upsells, etc. While topline growth is of course important, retention and monetization growth helps really grow the business at a sustainable level, as you create long term users who are adding a lot of value to your revenue growth, which is critical for the busines as well.
- Growth hacking has been twisted into a bunch of things by a lot of people. It’s because it sounds sexy, but in reality growth hacking is lots of hard work. There are rarely silver bullets—things that you just find that done right unlock a ton of opportunity. They are out there, but they are rare, and most of the time growth comes through ongoing, compounding efforts.
- Traditional marketing and growth channels are hyper-competitive Companies are resource constrained and can’t effectively compete Startups best bet are to leverage asymmetries in the market
- Because growth hacking is such a buzz word, and gets thrown around everywhere, there is a lot of backlash against what some perceive to be just sleazy tricks or ploys to skirt the rules to drive growth. Many argue that AirBnB’s growth hack of Craigslist was “unethical” and black hat. In their case, they actually were doing two things: Let AirBnB users auto-post their listings to the rentals section of Craigslist Hired people to spam people listing their properties on Craigslist to list them back on AirBnB as well Part 1 is a smart growth hack, part 2 is black hat tactics
- I like what Josh Elman says about growth hacking, and would just add that in addition to features you can also add and optimize channels that make your growth smarter, not more expensive.
- The notion of a growth hacker is dangerous too, as it creates this expectation of one mythical person who can come in and grow your business. While a head of growth is important, growth is a team sport, and needs the CEO to be actively involved for success. Growth has to be a priority. People ask all the time about hiring a growth lead, and when you ask them what everyone else at the company is working on, they say new features. That’s a red flag. You cannot bolt wings on to a Humvee and expect it to fly. Airplanes fly, they are built from the ground up to fly. The same goes for your product. You need people from many disciplines to help drive growth, and you as a leader must make it a priority.
- There are lots of things you could do to grow. James Currier, who we heard from earlier, says there are about 18 different ways to monetize a base, and many more ways to grow your business in the other types of growth. Lots of channels to test and features to build. But you have to prioritize and make your bets. How? Understand this formula. Growth is a function of the probability of success of your growth effort, the potential impact and the resources required to build it. You want this function to be high probability, high impact if it works, and one that doesn’t take a ton of resources until you have a good grasp on if it will actually work for you
- So what’s right for you? Where do you place your bets? It comes down to what are you optimizing for and what are your constraints? Brand new market or switching from something else? Best context for reaching them? Anyone actively seeking it? Use data and customer development to ID potential sources
- There are three main areas of acquisition, Viral or instrumented virality Word of Mouth Paid advertising
- One last thing on growth hacks to get your mind around and thinking about opportunities: Platform integrations: Facebook, Twitter, LinkedIn, Shopify, Google Docs, Google Analytics, Salesforce, Magento, Chrome, etc. all have millions of users you can leverage to get distribution Powered by: the power of the widget as we discussed with YouTube, SlideShare, Qualaroo, etc. Instrumented virality: dropbox and other viral referral programs (ScoreBig) Data driven hacks: Circle of Friends > Circle of Moms Igniting Word of Mouth: especially important for mobile, raise your phone up for Shazam or shake for Urban Spoon
- Tactics get saturated Metrics-driven marketers pile in User fatigue Stay on top of emerging tactics